Studying Hard vs Financial Planning

Hey there! I know that retirement might not be something that's at the top of your mind right now, especially if you're in your 20s. After all, you're probably more focused on things like building your career, paying off student loans, or just enjoying your youth while you can. However, the truth is that retirement is something that you should be thinking about – and planning for – as early as possible. In this article, I'll explain why retirement planning is so important for young adults, and give you some tips on how to get started.
First, let's talk about why retirement planning matters in the first place. I know that retirement can seem like it's decades away, but the truth is that time flies by faster than you think. Are you aware that we just lost 3 years of time during the pandemic lockdown? And the sooner you start planning for your retirement, the better off you'll be in the long run. Here are some reasons why:
This is just a mathematical projection of Malaysia's population. You can notice that the newborn population is shrinking and the older age population is constantly increasing. Where are you in the year 2060?
So, now that you understand why retirement planning is so important, let's talk about how you can start saving for retirement. If you're working in Malaysia, you're probably contributing to the Employees Provident Fund (EPF).
This is a retirement savings scheme that your employer and you both contribute to. The EPF offers some great benefits, like tax incentives and investment options that help your money grow over time.
But here's the thing – the EPF alone may not be enough to support you in retirement. That's because the EPF has a minimum savings target that is designed to cover only basic living expenses. According to EPF, their savings target for retirees is at least RM240,000 by age 55. However, this may not be enough to cover all your retirement expenses. So, you'll need to start thinking about other ways to supplement your retirement income, like investing in stocks or property or starting your own business.
One thing that's really important to keep in mind when it comes to your EPF savings is that you should try your best not to withdraw from your account for non-emergency usage. Do you remember all the initiatives that the Malaysian government allow you to withdraw from your EPF account during the pandemic? That is really for emergency purposes. But it also has long-term impacts on the economy such as driving up the inflation rate.
While it may be tempting to dip into your savings for things like a vacation or a down payment on a new car, remember that every time you withdraw money from your EPF account, you're reducing the amount of money you'll have for retirement. Plus, you'll also miss out on potential investment gains, which means that your money won't grow as much over time.
Of course, emergencies do happen, and there may be times when you need to withdraw from your EPF account. However, it's important to try and build up an emergency fund separately, so that you don't have to dip into your retirement savings in case of unexpected expenses.
Sometimes we need to ask ourselves why we are always being pushed to an extreme whereby not enough to spend. A simple suggestion from me is that maybe simple budgeting will help you to reduce your emotional and financial stress every month.
Finally, let's talk about how you can start saving more money for retirement. The key is to start budgeting and planning your finances early on so that you can maximize your savings potential.
So, there you have it – why retirement planning is so important for young adults, and how you can start taking steps to secure your financial future. Remember, the key is to start early and to make saving for retirement a priority. By doing so, you'll be able to enjoy your golden years without having to worry about money. Good luck! If you have any other better suggestions, please let me know in the comment section.
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